Iceland provides a unique opportunity to study the processes that occur along mid- ocean ridges. In 1991, thirty temporary seismic stations were installed at the Hengill volcanic complex to record high-quality digital data from local earthquakes. From these data 449 earthquakes have been located, most of them beneath the geothermal area. A local earthquake tomographic inversion was carried out to determine the three- dimensional V(_p) and V(_p) /V(_s) structure to 6 km depth, using P-wave travel times and S-P times from local earthquakes recorded in 1981 and 1991. The resulting models are smoothly varying and give a low data variance. The V(_p) model is similar to that of a previous tomographic inversion in the area, although the models differ in detail. The main high-V(_p) features of these models are interpreted as solidified intrusions, and underlie extinct volcanic centres. A low V(_p) /V(_s) body (-4%) is detected from 0 to 3 km depth that correlates with the surface expression of the geothermal field and is probably due to a combination of effects that include a slightly lower pore fluid pressure (and thus a higher steam content), and rock matrix alteration. Well-constrained moment tensors were determined for 70 local earthquakes by inverting the polarities and amplitude ratios of P and S arrivals. This method works well and is relatively insensitive to wave-speed model and attenuation variations. Most of the earthquakes are non-double-couple with explosive volumetric components. Only 17 (28%) of the earthquakes are consistent with a double-couple model. The remaining earthquakes are modelled as a combination of an opening tensile crack and a shear fault. Two geometries are considered: (1) rupture on two separate fault planes aligned at 45º, and (2) opening-shear rupture on a single fault plane, which is equivalent to coplanar tensile and shear faults. Both models can give the same moment tensors, and the data cannot distinguish between them. They give a good fit to the data, with few polarity misfits for most of the earthquakes. Right-lateral opening-shear strike-slip faulting on near-vertical planes is consistent with the regional seismicity of the South Iceland Seismic Zone. The non-double-couple earthquakes may result from the regional stress regime interacting with the geothermal field.